Ironing Out The Ironies(The Economics of Your Liquid Assets)

A funny thing happened to me the other day. Well, it wasn't
"funny ha ha". It was funny, "odd". I had scheduled an
interview with members from the Presbyterian Foundation
and a local church.
The purpose was to gather material for a proposed
article that would appear at
http://widgette.com, in the
Internet Gazette,
as well as, in other business publications.

The concept for the article was an economic analysis
of a typical American family's assets. In particular,
the best and worst case scenarios for liquid assets.
For most people understand the best case scenario,
but may not understand the worst case scenario.
The main reason for this is that the best case scenario
is usually very plain to see -- an interest rate that
gives a known return on your investment. The laws
have made the best case scenario very easy to see,
indeed. The bank, or other institution, giving a rate
of return must state the APR (annual
percentage rate). This interest rate is calculated through
an established formula making it easy for a consumer
to compare between institutions.

However, the worst case scenario is usually not so
easy to see. Which brings us back to the funny thing
that happened to me...

So, there I was on the way to the interview --
a routine drive of only a few miles. Er... a...
should I say it is usually a routine drive. But,
on this particular day it was anything but routine.
In my worst case scenario plan for driving to
the interview, I had not anticipated that we would
be hammered by a hurricane (the worst storm in
over 100 years.)

As I headed out into the pounding rain, I soon found
out that the traffic lights were without power.
While trying to avoid going through any intersections
with traffic lights, I started to find road closings.
Turning, turning, turning onto others roads...
I eventually ended right back where I started.

Wasn't this a bit more than ironic? Here I was
on my to find out what the worst case scenario
would be for my investment dollar. And, I wasn't
thinking that the worst case could ever really happen.

For instance, what if the dollar were to become
unstable? That would be a pretty bad case. What
if my dollars invested with the church were to
become worthless? That was going to be the premise of the
interview. And, I wasn't thinking that the worst case
could ever really happen.

Another bit of irony with the worst case scenario plan:
many of my friends and neighbors did not realize
(or thought that the worst case scenario couldn't happen
to them) that their homeowner's insurance does not
cover flood damage. Even though there were no
rivers or other bodies of water around, the water
came right up through the basement floors.
This means the storm waters were of
sufficient amount to raise the water
table into residential basements.
The last time this happened was.... Now
that I think about it, this had never happened here before.
Many
of the neighbors had no back-up power supply, so were
helpless to even pump water out. Quite a few
neighbors told me of their terror as they stood in
the dark with water rising in their house. Now,
they seem to be more serious about preparing
for a worst case scenario.

to be continued... with more on the investment with the
Presbyterian Foundation.

Current Asset Allocation

Click here to view the
investment strategy that accompanies this article.